Organic Sales Growth, $0.48 EPS and
Acquisition Activity Highlight Quarter
Delta Apparel, Inc. (NYSE American:DLA), a leading provider of
basic and branded apparel, headwear and related accessories, today
announced financial results for its fiscal year 2018 second quarter
ended March 31, 2018.
Net sales for the second quarter were $100.0
million, up $1.9 million, or 2%, from the prior year period’s net
sales of $104.1 million after excluding $6.0 million of sales in
the prior year period from the Company’s since-divested Junkfood
Clothing business. The Company achieved net income for the second
quarter of $3.6 million, or $0.48 per diluted share, an increase
over the prior year period’s $0.47 per diluted share after
excluding the approximately $0.11 per share gain realized in the
prior year period on the sale of the Junkfood Clothing business.
Gross margin expansion in the branded segment and the DTG2Go
business (previously Art Gun) was offset by a gross margin decline
in the Activewear business attributable to higher raw material and
other input costs, resulting in overall gross margins of 22.2%
compared to 23.3% in the prior year period.
For the first six months of fiscal year 2018,
net sales increased to $190.3 million from $189.5 million in the
prior year period and were up 9% year-over-year excluding prior
year sales in the Junkfood Clothing business of $15.4
million. A discrete provisional tax expense of $10.6 million
associated with the recent United States tax reform legislation
drove a net loss for the fiscal year 2018 first half of $6.3
million, or $0.87 per diluted share. Excluding the first
quarter discrete impact of the tax reform legislation, first half
earnings were $4.2 million, or $0.56 per diluted share, a 12%
increase over prior year period net income of $3.9 million, or
$0.50 per diluted share, and a 36% increase over the prior year
excluding the prior year gain on the sale of the Junkfood Clothing
business.
Basics Segment ReviewBasics segment revenue
increased by $2.9 million, or 4%, to $73.7 million for the fiscal
2018 second quarter. Activewear sales increased 2% for the
quarter, with 15% growth in catalog sales offset by a decline in
private label sales impacted by requests from customers in the
December quarter to pull forward shipments to meet holiday
demand. Catalog sales benefited from solid demand across all
sales channels, with particularly strong demand in the retail
license and regional screen print channels. The growth in
Catalog’s high-margin fashion basics t-shirt and fleece products
seen in prior periods continued during the quarter, especially in
the premium Delta Platinum line, with sales more than doubling
year-over-year.
The fiscal year 2018 second quarter was
particularly exciting for the Company’s digital print and
fulfillment business with the March 9, 2018, acquisition of the
DTG2Go business. The combined DTG2Go business (previously Art
Gun) achieved sales growth of nearly 60% over the prior year
period, including approximately 20% organic growth. DTG2Go’s
outstanding holiday service levels led to strong growth with nearly
all customers during the March quarter. Gross margins
strengthened within the DTG2Go business through improved
efficiencies and the leveraging of increased sales volumes across
the DTG2Go platform.
Branded Segment ReviewSecond quarter revenue in
the Branded segment was $26.3 million compared to $33.3 million in
the prior year period, which included sales from the Company’s
since-divested Junkfood Clothing business. Salt Life revenue
increased almost 7% for the quarter, with sales growth in most
channels. The increasing demand for Salt Life performance products
and other new categories continued, and strong momentum within Salt
Life’s direct-to-consumer channel, including robust eCommerce sales
growth, also contributed to the top-line growth. Salt Life’s gross
margins were consistent with the prior year period and drove solid
profitability for the quarter. Soffe sales for the quarter
declined slightly to $12.4 million from $12.8 million in the prior
year period, but its sales for the first six months were up
approximately 10% year-over-year. Increases in
eCommerce sales on www.soffe.com and in Soffe’s core business with
expanded sizing in the iconic Soffe short were key contributors
during the quarter. Soffe’s gross margins expanded 130 basis points
year-over-year due to cost structure improvements and a more
profitable product mix.
Robert W. Humphreys, Delta Apparel, Inc.’s
Chairman and Chief Executive Officer, commented, “Our fiscal 2018
second quarter was both productive and profitable, with
year-over-year organic sales and earnings growth in market
conditions that remained challenging. The combination of our Art
Gun business with the recently-acquired digital print business is a
game-changer from our perspective. The combined business,
which we now market under the DTG2Go trade name, gives us the most
comprehensive on-demand solution in the high-growth digital print
space. DTG2Go’s multi-location footprint offers customers
quick-turn shipments to any part of the United States as well as
market-leading international shipping competency.
“Activewear sales were up for the quarter, with
further sales acceleration in catalog fashion basics
products. We expect the strong market response to these
higher-margin products to continue in the back half of the year as
our 2018 product expansions, including additional fashion-forward
fabrications, styles and colors, hit the market. We also expect to
broaden our private label customer base in connection with a shift
we are seeing in customer sourcing strategies back to the Western
Hemisphere.
“Sales at Salt Life grew nicely year-over-year
and both gross margins and profitability held strong. Salt Life
continues to expand its account base, with a new national account
positively impacting second quarter results and another national
retailer launch happening in our third quarter. Salt Life’s
new branded craft beer line is scheduled for roll-out in Florida
during the fourth quarter and several other new product extensions
are planned for fiscal 2019.
“Despite an uneven retail environment and cost
pressures in a number of areas, our overall first-half performance
was solid and our team is focused on strategies that should
meaningfully impact both the top and bottom lines. We expect to see
incremental benefits from our new products and category extensions,
broadening customer base, and investments in the digital print and
fulfillment model. Our manufacturing platform continues to operate
efficiently and we are excited about our opportunities to increase
volumes and further capitalize on our additional capacity and
functionality. All things considered, we believe that Delta Apparel
is well-positioned for more organic growth and a strong finish to
fiscal year 2018.”
Conference CallThe Company will
hold a conference call with senior management to discuss its
financial results today at 4:30 pm ET. The Company invites
you to join the call by dialing 866-548-4713. If calling from
outside the United States, please dial 323-794-2093. A live
webcast of the conference call will be available at
www.deltaapparelinc.com. Please visit the website at least 15
minutes early to register for the teleconference webcast and
download any necessary software. A replay of the call will be
available through June 7, 2018. To access the telephone
replay, participants should dial toll-free 844-512-2921.
International callers can dial 412-317-6671. The access code
for the replay is 8903505.
About Delta Apparel, Inc.
Delta Apparel, Inc., along with its operating
subsidiaries, M. J. Soffe, LLC, Salt Life,
LLC and DTG2Go, LLC, is an international design,
marketing, manufacturing, and sourcing company that features a
diverse portfolio of lifestyle basic and branded activewear
apparel, headwear and related accessories. The Company specializes
in selling casual and athletic products across distribution tiers,
including specialty stores, boutiques, department stores, mid-tier
and mass chains, and the U.S. military. The Company’s products are
also made available direct-to-consumer on its
websites at www.saltlife.com, www.coastapparel.com, www.soffe.com
and www.deltaapparel.com. The Company's operations are located
throughout the United States, Honduras, El Salvador,
and Mexico, and it employs approximately 7,500 people
worldwide. Additional information about the Company is available
at www.deltaapparelinc.com.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains “forward-looking”
statements that involve risks and uncertainties. Any number
of factors could cause actual results to differ materially from
anticipated or forecasted results, including, but not limited to,
the volatility and uncertainty of cotton and other raw material
prices, the general U.S. and international economic conditions, the
competitive conditions in the apparel industry, restrictions on our
ability to borrow capital or service our indebtedness,
deterioration in the financial condition of our customers and
suppliers and changes in the operations and strategies of our
customers and suppliers, our ability to predict or react to
changing consumer preferences or trends, our ability to
successfully open and operate new retail stores in a timely and
cost-effective manner, pricing pressures and the implementation of
cost reduction strategies, changes in economic, political or social
stability at our offshore locations, disruptions at our
manufacturing and other facilities, our ability to attract and
retain key management, the effect of unseasonable or significant
weather conditions on purchases of our products, and other factors
set forth in the "Risk Factors" contained in our Annual Reports on
Form 10-K filed with the Securities and Exchange
Commission. Except as may be required by law, Delta
Apparel, Inc. expressly disclaims any obligation to update
these forward-looking statements to reflect events or circumstances
after the date of this press release or to reflect the occurrence
of unanticipated events.
Company
Contact: Deborah Merrill Chief
Financial Officer(864) 232-5200 x6620
Investor Relations Contact:
Sally Wallick, CFA(404)
806-1398investor.relations@deltaapparel.com
|
|
|
|
|
|
|
|
|
SELECTED FINANCIAL DATA: |
(In thousands, except per share amounts) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
Mar 31, 2018 |
|
Apr 1, 2017 |
|
Mar 31, 2018 |
|
Apr 1, 2017 |
|
|
|
|
|
|
|
|
|
|
|
Net
Sales |
$ |
100,004 |
|
|
$ |
104,138 |
|
|
$ |
190,346 |
|
|
$ |
189,473 |
|
|
Cost of Goods Sold |
|
77,769 |
|
|
|
79,908 |
|
|
|
151,741 |
|
|
|
147,685 |
|
|
Gross Profit |
|
22,235 |
|
|
|
24,230 |
|
|
|
38,605 |
|
|
|
41,788 |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and Administrative |
|
16,737 |
|
|
|
18,250 |
|
|
|
31,717 |
|
|
|
35,559 |
|
|
Change in Fair Value of Contingent
Consideration |
|
(100 |
) |
|
|
(100 |
) |
|
|
(400 |
) |
|
|
(200 |
) |
|
Gain on Sale of Business |
|
- |
|
|
|
(1,295 |
) |
|
|
- |
|
|
|
(1,295 |
) |
|
Other (Income), Net |
|
(16 |
) |
|
|
(145 |
) |
|
|
(64 |
) |
|
|
(267 |
) |
|
Operating Income |
|
5,614 |
|
|
|
7,520 |
|
|
|
7,352 |
|
|
|
7,991 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
|
1,350 |
|
|
|
1,312 |
|
|
|
2,685 |
|
|
|
2,613 |
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Provision for Income Taxes |
|
4,264 |
|
|
|
6,208 |
|
|
|
4,667 |
|
|
|
5,378 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
632 |
|
|
|
1,661 |
|
|
|
10,988 |
|
|
|
1,436 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
$ |
3,632 |
|
|
$ |
4,547 |
|
|
$ |
(6,321 |
) |
|
$ |
3,942 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding |
|
|
|
|
|
|
|
|
|
Basic |
|
7,195 |
|
|
|
7,600 |
|
|
|
7,231 |
|
|
|
7,599 |
|
|
|
Diluted |
|
7,496 |
|
|
|
7,845 |
|
|
|
7,231 |
|
|
|
7,870 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) per Common Share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.50 |
|
|
$ |
0.60 |
|
|
$ |
(0.87 |
) |
|
$ |
0.52 |
|
|
|
Diluted |
$ |
0.48 |
|
|
$ |
0.58 |
|
|
$ |
(0.87 |
) |
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar 31, 2018 |
|
Sep 30, 2017 |
|
Apr 1, 2017 |
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash |
|
|
$ |
434 |
|
|
$ |
572 |
|
|
$ |
686 |
|
|
|
Receivables, Net |
|
|
|
60,083 |
|
|
|
47,557 |
|
|
|
59,598 |
|
|
|
Income Tax Receivable |
|
|
|
- |
|
|
|
352 |
|
|
|
328 |
|
|
|
Inventories, Net |
|
|
|
172,213 |
|
|
|
174,551 |
|
|
|
180,699 |
|
|
|
Prepaids and Other Assets |
|
|
|
4,185 |
|
|
|
4,662 |
|
|
|
6,947 |
|
|
Total Current Assets |
|
|
|
236,915 |
|
|
|
227,694 |
|
|
|
248,258 |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
Property, Plant & Equipment, Net |
|
|
|
50,093 |
|
|
|
42,706 |
|
|
|
43,060 |
|
|
|
Goodwill and Other Intangibles, Net |
|
|
|
50,602 |
|
|
|
36,068 |
|
|
|
36,518 |
|
|
|
Deferred Income Taxes |
|
|
|
1,996 |
|
|
|
5,002 |
|
|
|
3,800 |
|
|
|
Other Noncurrent Assets |
|
|
|
6,288 |
|
|
|
6,332 |
|
|
|
5,755 |
|
|
Total Noncurrent Assets |
|
|
|
108,979 |
|
|
|
90,108 |
|
|
|
89,133 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
$ |
345,894 |
|
|
$ |
317,802 |
|
|
$ |
337,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Accounts Payable and Accrued Expenses |
|
|
$ |
63,984 |
|
|
$ |
64,039 |
|
|
$ |
79,971 |
|
|
|
Income Tax Payable |
|
|
|
256 |
|
|
|
- |
|
|
|
- |
|
|
|
Current Portion of Capital Lease Financing |
|
|
|
2,336 |
|
|
|
848 |
|
|
|
715 |
|
|
|
Current Portion of Long-Term Debt |
|
|
|
6,356 |
|
|
|
7,548 |
|
|
|
8,172 |
|
|
Total Current Liabilities |
|
|
|
72,932 |
|
|
|
72,435 |
|
|
|
88,858 |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
Long-Term Taxes Payable |
|
|
|
7,414 |
|
|
|
- |
|
|
|
- |
|
|
|
Long-Term Capital Lease Financing |
|
|
|
8,402 |
|
|
|
2,519 |
|
|
|
2,282 |
|
|
|
Long-Term Debt |
|
|
|
105,798 |
|
|
|
85,306 |
|
|
|
89,203 |
|
|
|
Other Noncurrent Liabilities |
|
|
|
5,850 |
|
|
|
1,655 |
|
|
|
2,299 |
|
|
Total Noncurrent Liabilities |
|
|
|
127,464 |
|
|
|
89,480 |
|
|
|
93,784 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
145,498 |
|
|
|
155,887 |
|
|
|
154,749 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders'
Equity |
|
|
$ |
345,894 |
|
|
$ |
317,802 |
|
|
$ |
337,391 |
|
|
|
|
|
|
|
|
|
|
|
|
Delta Apparel (AMEX:DLA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Delta Apparel (AMEX:DLA)
Historical Stock Chart
From Apr 2023 to Apr 2024